82. As we have made abundantly clear, the scale of the task involved in implementing the Directive is not yet known, and it will not be until the definitions of water status classifications are finalised. As the Environment Agency told us, "decisions on the definition of status classifications taken early in the Programme could therefore have a fundamental impact on the level of costs and hence cost­effectiveness much later".[143] As a result Defra's estimates of the likely cost of the Directive ranged widely, from £2.0 billion to £9.2 billion.[144] Similarly the water industry has estimated that it will need to invest between £1.9 and £9.0 billion to meet the requirements of the Directive.[145] Another water industry research report has suggested that the costs may reach up to £18 billion.[146] Clearly, the ultimate cost will depend on how thoroughly Defra chooses to enforce the Directive, since it is open to interpretation.

A cost-benefit approach

83. The Parliamentary Under-Secretary at Defra told us that the Directive makes provision for a cost-benefit approach to implementation.[147] He welcomed the fact that the Directive acknowledged that "if the costs are so enormous in relation to what might be a minor benefit, then it is not worth pursuing those kinds of costs".[148] We agree that it is prudent to take a cost-benefit approach in order to prevent costs spiralling out of control in vain attempts to achieve difficult or impossible goals. However, whilst derogations may be necessary, they must be employed sparingly in order to avoid undermining the spirit and purpose of the Directive.

84. A number of our witnesses raised the issue of cost-benefit analysis in a wider sense, about the Directive as a whole. For example WaterVoice[149] and the WWF argued that the benefits of the Directive had not been properly evaluated. The WWF told us that it felt that "..the current methods for assessing costs and benefits do not take adequate regard of the environmental needs and possible environmental damage through certain measures which must be adopted."[150] Conversely the National Farmers' Union also took a less positive view of potential benefits of the Directive, pointing to a study which had said that "the costs [of the Directive] were likely to exceed the benefits ... a lot of the cost was very inefficient at generating benefit".[151] South West Water Limited cited research by WRc plc that had found that the costs of the Directive would be £2.0 to £9.2 billion, whilst it the overall benefits to customers and the public would be £1.6 to £6.2 billion.[152]

Gold-plating and strategic thinking

85. The Government has made it clear that it does not intend to pre-empt any of the deadlines laid out in the timetable for implementation of the Directive, possibly owing to fears that it may be accused of 'gold-plating'. Many of our witnesses felt that this approach is inflexible, impractical and may ultimately lead to unnecessary failure to adhere to the statutory timetable for implementation. For example, Severn Trent said that "the reality is that such a last minute approach is highly likely to fail to meet the statutory timescale and almost certainly does not produce the most cost effective way to implement directives signed up to by Government".[153] The company expressed concern that the result might be a legal challenge by the European Commission.

86. We recognise and support the Government's reluctance to 'gold-plate' the implementation of the Water Framework Directive. It is worth noting, though, that concerns about 'gold-plating' of the Directive do not, as they usually do, relate to additions to the Directive, but rather to the timing of its implementation. It is illogical categorically to rule out early completion of certain aspects of the Directive, particularly when so many of the affected parties are keen to make progress, or at least to have issues clarified. A 'last-minute' approach to implementation may keep short-term costs down, but it may prove more expensive in the long-run - and is hardly in keeping with the spirit of the Directive. And moving more quickly towards implementation will help to identify and iron out difficulties in good time.

Synchronising current economic planning cycles with the Directive

87. We have already discussed the difficulties of co-ordinating planning policies and decisions made in respect of river basin management plans. Similar issues apply to co-ordination with the water industry and its regulator. The water industry currently follows a five-year cycle of periodic reviews, regulated by Ofwat.[154] The Water Framework Directive will introduce a 6-year River Basin Management Plan cycle. Several witnesses asked that Ofwat might consider synchronising the two cycles, since the River Basin Management Plan is likely to have a strong bearing on investment decisions by water companies. We recommend that Defra, together with Ofwat, consider whether or not to synchronise the periodic review and River Basin Management Plan cycles. We recommend that they report back to us about the benefits and disadvantages they perceive would be the result of such synchronisation.

Conclusions about costs and 'gold-plating'

88. The Government is committed to taking account of the costs and benefits of steps taken to implement the Water Framework Directive. It is also determined not to gold-plate the Directive. It is right on both counts, although it is worth noting the interpretation of the European Commission that this is not a Directive based on cost-benefit analyses, but rather on the achievement of results on a 'least-cost' basis.[155] However, several of our witnesses made the point that introducing the Directive only at the last-minute and only in a piecemeal fashion would not necessarily prove inexpensive. For example, Water UK told us that

the piecemeal approach resulting from incomplete implementation may produce short­term savings. However, in the longer term it leads to sub­optimal design and potentially higher costs for customers. We run the very real risk of repeating the mistakes of the past if we work to the principle of latest possible delivery dates for the Water Framework Directive.[156]

Severn Trent Water Limited took a very similar perspective. The company said that it understood that

as a matter of policy no element of the Water Framework Directive will be delivered until the latest permitted date. This is apparently on the basis that early delivery of European directives has been described by the government as 'gold­plating'. By contrast, the reality is that such a last minute approach is highly likely to fail to meet the statutory timescale and almost certainly does not produce the most cost effective way to implement directives signed up to by Government.[157]

It is worth noting that these comments reflect the views of those organisations which will have to make the most immediate changes to their investment plans as a result of the Directive.

89. Objections to the 'no gold-plating' approach advocated by the Government also came from a very different perspective: that of the environmental NGOs. The WWF reported that there "seems to be an obsession in Defra and in parts of the Environment Agency with 'no gold-plating' of the Water Framework Directive. In practice this has meant that many sensible ideas for implementation ... have not been given sufficient consideration".[158] The RSPB argued that fears of gold-plating were in any event over-blown. It told us that "the perception of excessive regulation from Brussels may arise from British delays in implementation (e.g. the Nitrates Directive), which have led to several directives being brought in concurrently to avoid legal action".[159] Finally, the Wildlife Trusts expressed concern about the Government's "typically over-cautious" approach to European environmental legislation, and said that

the widespread belief that the United Kingdom is guilty of 'gold-plating' European regulations to the detriment of our industrial or agricultural competitiveness does not appear to be borne out by the facts. Infraction proceedings have been threatened over a number of Directives including those controlling Groundwater Pollution and Nitrates.[160]

The Wildlife Trusts argued that a cautious approach "creates regulatory uncertainty for industry and agriculture", and it urged "the Government to act, before it is required to, under the terms of the Directive where this is necessary to provide best value to the United Kingdom taxpayer".[161]

90. Deciding not to 'gold plate' the Water Framework Directive, and carefully to scrutinise the costs and benefits of it, does not necessarily equate to implementing it at the last possible moment and in a minimalist fashion. Such an approach both flies in the face of the spirit of the Directive, and is not helpful to the water industry and others who must make investments as a result of it. Putting in place the administrative arrangements needed to implement the Directive, making decisions about investments by water companies and the allocation of resources by the Government itself, and even determining the total costs of the Directive depend on clarity about the Government's approach. We believe that a clear commitment to the Directive, and far-reaching decisions about its implementation, made now would benefit all those affected by it, provided that the Directive is implemented no faster and no slower, no more elaborately nor more laxly, than in other major Member States.

Conclusions and recommendations

91. We have reached conclusions and made recommendations throughout this Report: they are repeated below. Our over-arching conclusion is that the Government appears to believe that the Water Framework Directive is just another piece of environmental legislation from the European Union, which it can implement with the minimum of fuss. We do not agree. Whether or not one supports the Directive, there can be no dispute that its objectives are far-reaching, and its implementation will affect a wide range of organisations, requiring considerable scientific study, administrative changes, and other adjustments by a range of industries, not least the water and agricultural sectors. An indication of the work required was given by the RSPB, which we summarise in the box below. Bearing in mind the work to be done, the timetable for implementation is quite short.

92. Therefore we urge the Government to address the Water Framework Directive with more urgency. It presents challenges, particularly to agriculture, which is facing financial difficulty. But the Directive also presents opportunities. We urge the Government to view the Directive positively, and, rather than doing the bare minimum required at the last possible moment, to implement it in such a way that the benefits are maximised. The Directive could be an opportunity to make real the concept of 'sustainable development': we urge the Government to seize that opportunity.

93. Our other conclusions and recommendations are:

1.  The Water Framework Directive offers the potential of enormous environmental and social benefits, but at the same time it will dramatically affect the ways in which farming, industries and others conduct their activities. Therefore the first - and perhaps over-riding - conclusion of our inquiry is that the Directive needs much greater public promotion. We hope that all parties affected by the Directive, as well as the media, will now recognise the significance of the Directive, and begin to give it the attention and discussion it deserves, and that the Government gives a much clearer lead about its implications, techniques and costs of implementation (paragraph 8).

2.  Past experience suggests that most if not all Member States will fail to achieve proper and full implementation of the Water Framework Directive within the timescale set out in the Directive. That is disappointing, but it is, as we have

Integration and the Water Framework Directive[162] The RSPB identifies several layers of 'integration', which lie at the heart of the Water Framework Directive. Taken together, the achievement of this integration represents a considerable body of work: -   Integration of environmental objectives, combining quality, ecological and quantity objectives for protecting highly valuable aquatic ecosystems and ensuring a general good status of other waters; -   Integration of all water resources, combining fresh surface water and groundwater bodies, wetlands, coastal water resources at the river basin scale; -   Integration of all water uses, functions and values into a common policy framework, i.e. investigating water for the environment, water for health and human consumption, water for economic sectors, transport, leisure, water as a social good; -   Integration of disciplines, analyses and expertise, combining hydrology, hydraulics, ecology, chemistry, soil sciences, technology engineering and economics to assess current pressures and impacts on water resources and identify measures for achieving the environmental objectives of the Directive in the most cost­effective manner; -   Integration of water legislation into a common and coherent framework. The requirements of some old water legislation have been reformulated in the Water Framework Directive to meet modern ecological thinking. After a transitional period, these old Directives will be repealed. Other pieces of legislation (e.g. the Nitrates Directive and the Urban Wastewater Treatment Directive) must be co­ordinated in river basin management plans where they form the basis of the programmes of measures; -   Integration of all management and spatial planning aspects of relevance for sustainable river basin planning such as measures of flood protection and prevention; -   Integration of a wide range of measures, including pricing and economic and financial instruments, in a common management approach for achieving the environmental objectives of the Directive. Programmes of measures are defined in River Basin Management Plans developed for each river basin district; -   Integration of stakeholders and the civil society in decision making, by promoting transparency and information to the public, and by offering an unique opportunity for involving stakeholders in the development of river basin management plans; -   Integration of different decision­making levels that influence water resources and water status, be local, regional or national, for an effective management of all waters; -   Integration of water management from different Member States, for river basins shared by several countries, existing and/or future Member States of the European Union.

said, a common problem. Over time, Member States should address the issue, in particular by only agreeing to new Directives after the practical and economic implications of their implementation have been fully assessed and costed (paragraph 18).

3.  There are a number of predominantly scientific questions surrounding the Water Framework Directive. It is only by answering such questions that properly informed decisions can be made about the strategies and resources needed to implement the Directive. The questions which recurred throughout our inquiry were:

(a) How should we define water status in ecological terms - which groups of plants and animals should form the basis of this definition;

(b) Which groups of plants and animals should be expected in waters of 'high' ecological status, and what scientific evidence exists to support this definition of a reference state?

(c) What physical, chemical and biological conditions are required by these plants and animals, and to what extent can these deviate from this reference condition in waters of 'good' ecological status?

(d) In what ways would the definitions of 'high' and 'good' ecological status vary between different regions of England and Wales and between different water body types?

(e) How many waters in England and Wales currently fail to achieve 'high' or 'good' ecological status?

(f) What strategies and resources would we need to protect waters presently of 'high' or 'good' ecological status?

(g) How might we generate preferred conditions in other waters to restore these to at least 'good' status within the prescribed timetable of the Water Framework Directive?

(h) What scientific and financial resources are needed to answer all the scientific issues raised by the implementation of the Directive?

Perhaps the most important of these questions, at least initially, is that which asks what is the current state of water quality in surface and ground waters in England and Wales. Before decisions can be made about what policies are needed to meet the objectives of the Water Framework Directive, it is vital that a clear understanding is reached of the current status of these waters, as currently no comprehensive overview exists of the ecological state of waters in England and Wales (paragraph 22).

4.  We readily acknowledge the improvements in oxygen status that have been achieved in the rivers of England and Wales in recent decades and the return of key indicator species such as salmon to many of our river systems. We are aware, however, that this has been achieved largely through investment in improving the quality of effluent discharged from major sewage treatment works and to a lesser extent the reduction in industrial pollution resulting from shrinkage in the manufacturing sector and the better management of animal wastes on farm holdings - sources of pollution which are relatively easy to identify and, with technological advances, to treat. We are far less sanguine about the wider picture (paragraph 29).

5.  We are very concerned about the eutrophication of British waters, especially in Sites of Special Scientific Interest (paragraph 32).

6.  It will be necessary to integrate the response to the Water Framework Directive with domestic flood control and planning policies. And if the assessment of water quality is to go beyond current measures a wider range of pollutants and sources of pollution will have to be taken into account (paragraph 34).

7.  It has been estimated that nitrogen loading on British waters is nearly three times higher now than it was in the first half of the last century, and that phosphorus loading is more than twice as high now as it was then (paragraph 46).

8.  The extent of the diffuse pollution problem in the water bodies of England and Wales is symptomatic of the intensity with which we use the landscape (paragraph 47).

9.  Limiting diffuse pollution will be a costly and expensive undertaking, and will impact on an agricultural industry which is already under severe pressure. It is likely to require changes in agricultural practice - perhaps even to the direction and ethos of the CAP. As such it is emblematic of the significance and wide-ranging impact of the Water Framework Directive (paragraph 47).

10.  The Government should be now clarify the timetable for completion of the strategic review of diffuse pollution from agriculture. We trust that the review will consult as widely as possible about the scale of the problem, and the strategies and resources needed to bring this most intractable of pollution sources under control. Given the likely impact that dealing with diffuse pollution will have on the agriculture industry we recommend that the review assess carefully the financial implications of the Directive for the agricultural industry to ensure that the costs of implementation for this sector are proportionate in respect of its present ability to pay (paragraph 48).

11.  We urge the Environment Agency and others to be more aware of the status of lakes and ponds (paragraph 51).

12.  In short, there is again clearly little agreement about the scale of the problem faced and about the implications of implementing the Directive, and this must be resolved as soon as possible (paragraph 52).

13.  The scale of the task involved in achieving good ecological status in our waters is not yet known (paragraph 56).

14.  As a matter of urgency, we recommend that a scientific Steering Group be set up to advise Defra and the Environment Agency on the science surrounding the Water Framework Directive. The Steering Group should comprise leading experts in freshwater, estuarine and marine ecology. The Group should be charged with the task of

·  reviewing the evidence which already exists regarding the physical, chemical and biological status of waters across England and Wales;

·  assessing the extent to which our waters in their present state could be classed as of 'high' or 'good' ecological status;

·  identifying gaps in the evidence needed to make that assessment; and

·  commissioning research on behalf of Defra and the Environment Agency to fill such gaps in knowledge (paragraph 57).

15.  We recommend that Defra clarify what its role is and will be in respect of the Water Framework Directive, and exactly what role will be taken by the Environment Agency if it is decided that it is to be the competent authority under the Directive. We further recommend that a 'ministerial champion' be designated in relation to the Water Framework Directive, able to bring together representatives from all Government Departments and other organisations involved in the implementation of the Directive (paragraph 60).

16.  Nevertheless, underlying our recommendations is a plea that the Government should engage those directly affected by the Directive in dialogue to explain what steps they are or will be required to take (paragraph 61).

17.  Any failure adequately to resource the Environment Agency to perform its responsibilities under the Water Framework Directive would be wholly unacceptable. Having signed up to the Directive the Government is obliged to provide the resources to ensure that the Directive can be implemented, and implemented well (paragraph 63).

18.  We recommend that the Government examine concerns about possible conflicts of interest arising as a result of the designation of the Environment Agency as competent authority, and that it act to resolve them as necessary (paragraph 64).

19.  We have considered the arguments made about the disparity between the designation of the Environment Agency as sole competent authority under the Directive and its perceived lack of a democratic mandate. We are not persuaded by them, particularly since most of the alternatives proposed would require yet another layer of government to be created to oversee river basins. Instead, we believe that mechanisms which allow proper consultation with the public and other relevant bodies will respond to concerns about the democratic legitimacy of the process (paragraph 66).

20.  We strongly recommend that the Government begin now to develop the arrangements, agreements and protocols which will be needed to ensure that the river basin management plans drawn up by the Environment Agency as competent authority carry sufficient force - and to ensure that the Agency is required to take into account the views of others in drawing up the management plans. Clarity about such matters is in any event essential, but settling the details of these administrative arrangements sooner rather than later will allow shortcomings to be identified and addressed (paragraph 70).

21.  But until the administrative arrangements which will enable the Environment Agency to function as the competent authority have been properly explored, Defra cannot be certain that primary legislation is not required. We therefore repeat our recommendation that possible shortcomings in such administrative arrangements be identified as early as possible, and we recommend that the Government keep an open mind about the need for primary legislation to address such shortcomings. To address this issue the Government should publish a legislative impact study on the requirements of the Directive. In particular it should examine how it relates to existing law in planning, abstraction controls, discharges and flood defence requirements. It should also address the question of whether any new laws are required, particularly in areas such as groundwater management (paragraph 71).

22.  We welcome the Government's belated decision to conduct a pilot in the Ribble valley basin. We trust that the pilot will be comprehensive, and not just a token exercise. We also trust that the results of the pilot will be published. We seek from the Government confirmation that the study will fully address the following points; clarification of the concept of good water status and the extent of the improvements necessary to achieve this; provision of an economic assessment of all aspects of implementing the Directive in the Ribble basin; trialing of measures designed to address different aspects of diffuse pollution; an assessment of the links between biodiversity and river basin plans, including the role of wetlands and salt marshes; and the means whereby all interested parties can be fully involved in the implementation process. We recommend that the lessons learnt in the Ribble valley inform decisions about the administrative arrangements concerning the Environment Agency's role as competent authority (paragraph 73).

23.  Many of our recommendations will inevitably lead to greater involvement by local government in the process of implementing the Water Framework Directive. Nevertheless, we recommend that the Government take further urgent steps to encourage local authorities, as well as all affected sectors of industry, to become involved in discussions about the implementation of the Directive (paragraph 75).

24.  We recommend that Defra begin work now to determine how best to interest the public in the Water Framework Directive. Information should be provided both nationally, in terms of the reasons for, and potential impact of, the Directive as a whole, and locally, in the context of river basin management plans (paragraph 76).

25.  In short, there is a palpable lack of urgency - perhaps even a sense of complacency - in the approach currently taken to making administrative arrangements to implement the Directive (paragraph 78).

26.  Implementation of the Water Framework Directive gives an opportunity for Defra to give real meaning to the rather nebulous concept of 'sustainable development'. We strongly urge the Department to approach it in that spirit, and to act positively and with enthusiasm in dealing with the Directive (paragraph 80).

27.  These ambiguities need to be resolved urgently so that an accurate total cost estimate can be produced. The 'polluter pays' approach to cost distribution set out in the Directive is generally accepted as a fair one; but as we have said agriculture can ill-afford the significant expense that it would incur if that approach was applied to diffuse pollution. 'End-of-pipe' treatment is likely to prove expensive to water companies and their customers, and will not tackle the root of the problem (paragraph 81).

28.  We recognise and support the Government's reluctance to 'gold-plate' the implementation of the Water Framework Directive. It is worth noting, though, that concerns about 'gold-plating' of the Directive do not, as they usually do, relate to additions to the Directive, but rather to the timing of its implementation. It is illogical categorically to rule out early completion of certain aspects of the Directive, particularly when so many of the affected parties are keen to make progress, or at least to have issues clarified. A 'last-minute' approach to implementation may keep short-term costs down, but it may prove more expensive in the long-run - and is hardly in keeping with the spirit of the Directive. And moving more quickly towards implementation will help to identify and iron out difficulties in good time (paragraph 86).

29.  We recommend that Defra, together with Ofwat, consider whether or not to synchronise the periodic review and River Basin Management Plan cycles. We recommend that they report back to us about the benefits and disadvantages they perceive would be the result of such synchronisation (paragraph 87).

30.  Deciding not to 'gold plate' the Water Framework Directive, and carefully to scrutinise the costs and benefits of it, does not necessarily equate to implementing it at the last possible moment and in a minimalist fashion. Such an approach both flies in the face of the spirit of the Directive, and is not helpful to the water industry and others who must make investments as a result of it. Putting in place the administrative arrangements needed to implement the Directive, making decisions about investments by water companies and the allocation of resources by the Government itself, and even determining the total costs of the Directive depend on clarity about the Government's approach. We believe that a clear commitment to the Directive, and far-reaching decisions about its implementation, made now would benefit all those affected by it, provided that the Directive is implemented no faster and no slower, no more elaborately nor more laxly, than in other major Member States (paragraph 90).

31.  We urge the Government to address the Water Framework Directive with more urgency. It presents challenges, particularly to agriculture, which is facing financial difficulty. But the Directive also presents opportunities. We urge the Government to view the Directive positively, and, rather than doing the bare minimum required at the last possible moment, to implement it in such a way that the benefits are maximised. The Directive could be an opportunity to make real the concept of 'sustainable development': we urge the Government to seize that opportunity (paragraph 92).

144   Ev 147, para.24. Back

145   Ev 96, para.20. Back

146   Ev 200, para.2.5. Back

147   See paragraph 12 of the Preamble to the Directive. Back

148   See Q 554. Back

149   Q 93. Back

150   Q 124. Back

151   Q 474. Back

152   Ev 200, para.2.5. Back

153   Ev80. Back

154   See information about the Periodic Review 2004 at http://www.ofwat.gov.uk/. Back

155   Qq 40 and 41. Back

156   Ev 94, Executive Summary, para.2. Back

157   Ev 80, p.4. Back

158   Ev 27, para.2.5. Back

159   Ev 31, para.11. Back

160   Ev 206, para.14. Back

161   Ev 206, para.15. Back

162   Ev 243, para.5.1; the RSPB says that this is draft wording which will in due course be included in Common Implementation Strategy Guidance documents. Back